After undergoing leadership transition and portfolio restructuring last year, Cognizant
is optimistic about its growth prospects in 2020. While the company plans to add 20,000 graduates, it is focusing on high-growth areas such as digital technologies and the international market. Brian Humphries
, CEO of the Nasdaq-listed IT services firm, told Debasis Mohapatra
that the firm didn’t face any client-specific issue. Edited excerpts:
Cognizant has once again given a conservative outlook for 2020 with a revenue growth guidance of 2-4%. Why such pessimism?
We are committed to accelerate our revenue growth but the reality is, we have exited the content servicing business, which impacts the revenue growth by one per cent (100 basis points). So, without exiting that business, the growth could have been around 5 per cent. But we are optimistic about growth as there is a lot of momentum.
Will there be any new revenue stream to compensate for the loss arising from the exit of content servicing business?
We always try to achieve whatever we guide as you have seen in this quarter. That is essential for the shareholders as we deliver what we promise to them. We have deliberately built our strategy to focus on high growth areas like digital space and international market. That will give us a better canvas in which we play.
Cognizant’s operating margin which used to be in the range of 18-19%, now hovers around 17 per cent. For 2020, you are expecting this to be 16-17%. Will this help you in winning more deals?
In an increasingly digital world, it is less about large deals and more about projects. The world is evolving more towards digital, which is project-based. We have seen increase in our win rates (as compared to last year) and the pipeline is building (up). So, I feel confident that we are on the right path.
So, the concern regarding losing business to competitors is kind of over now?
We didn’t have any strategy to lose momentum to competitors. Our strategy has always been to focus on our clients and to reinvest into our portfolio to grow both organically and in inorganic way. This week, we have announced our intent to acquire a firm with Salesforce practice. All the distractions of 2019 is behind us and our 100 per cent focus is on clients now.
Is the cost optimisation strategy on track for the firm?
Yes, that is on track. But, we don’t pursue cost as a strategy as our focus is on growth. We continue to reinvest our cost savings into growth. As you have seen, we continue to grow our headcount. We will add around 20,000 fresh graduates in the coming year alone. It is about making the investment needed to facilitate our growth.
What is the demand outlook in financial services and healthcare verticals? Are the client specific issues over for Cognizant?
Macro environment remains stable but challenging. We see strong demand in digital technologies as our growth was more than 20 per cent in the fourth quarter. As far as legacy business is concerned, we see growth subject to pricing pressure and insourcing as well. However, we don't have any client specific issues.